Banks in Real EstateOn March 11, 2009, President Obama signed into law the FY2009 Omnibus Appropriations Act that permanently prohibits banks from entering the real estate brokerage and management businesses.Frequently Asked Questions>

Why should REALTORS® care?If banks had been allowed to engage in real estate brokerage, it would have created anti-competitive and anti-consumer concentrations of power within the financial services sector, which would have ultimately increased costs for homebuyers.

Historic Summary Information:

In early 2001, the Federal Reserve Board and the U.S. Treasury Department proposed rules to expand the powers of national bank conglomerates. The agencies proposed allowing national bank conglomerates to engage in real estate brokerage and management, reclassifying these activities as financial in nature. NAR strongly opposed the proposal, arguing that the Bank Holding Company Act of 1956 and the Gramm-Leach-Bliley Act (GLB Act) of 1999 did not authorize banking firms to provide real estate brokerage and property management services, as these are nonfinancial, inherently commercial activities.

&nbspUnder the 2001 proposed &nbspregulation:

&nbspHow it works today:

Federal subsidies could be used to fund banks' real estate businesses.

Real estate brokers and managers compete in the marketplace without using your tax dollars to prop up their businesses.

Bank-affiliated agents would be pressured to focus on the needs of parent companies and shareholders.

REALTORS® succeed or fail based on how well they serve the needs of customers.

There are currently 1.3 million REALTORS® in the U.S who specialize in serving their local communities and economies—not in draining money out of them and sending it to Wall Street.

The real estate industry would be subject to stringent federal regulation by the Federal Reserve, the Treasury Department, and the Federal Trade Commission. This could involve privacy regulations, financial solvency, reporting, and examination requirements.

Real estate practitioners are licensed and regulated at the state level. Additionally, members of the NATIONAL ASSOCIATION OF REALTORS® pledge to conduct their businesses according to a strict code of ethics.

Why should consumers care?Consumers-especially first-time home buyers might have experienced adverse effects if banks were allowed to become real estate brokers and managers. Bank employees would not have had the same fiduciary relationship with consumers that independent real estate professionals have.

&nbspThe goals of a &nbspbank broker/agent:

&nbspThe goals of an independent &nbspbroker/agent:

Sell buyers the bank's loans and other financial products at the best terms for the parent companies.

Match consumers with the best housing solution. Nearly all real estate professionals are self-employed independent contractors who rely on reputation for business referrals.

Protect the integrity of the institution's lending portfolio.

Work with the customer to make sure the real estate transaction is a positive experience and the dream of homeownership is not tarnished.

How did this happen?In early 2001, the Federal Reserve Board and the U.S. Treasury Department published a proposed regulation that would let national bank holding companies and financial subsidiaries of national banks engage in real estate brokerage and management.

Although the Bank Holding Company Act of 1956 and the Gramm-Leach-Bliley Act (GLB Act) of 1999 permit the Federal Reserve and the Treasury Department to identify new categories of financial activities permissible for bank conglomerates, the regulators do not have authority to designate inherently commercial activities, such as real estate brokerage and property management activities, as financial.